Vincent Bryant, CEO and co-founder of Deepki, discusses the importance of improving energy efficiency across property portfolios if managers are to avoid the worst this winter.
The UK is one of the most exposed countries in Europe to surging gas prices. At the same time, British buildings are among the continent’s least energy efficient.
These are the findings from the Institute for Government’s investigation into the UK’s energy crisis published this September, which also found that “energy inefficiency will remain a major vulnerability beyond the short term” and argued that “improving energy efficiency could make a much bigger difference than energy supply measures in the medium term”.
And while the UK real estate sector is among the worst affected by the current energy crisis, it is far from alone.
Research from Deepki with 250 commercial real estate asset managers based not only in the UK but Germany, France, Spain and Italy, published this October, revealed the huge energy cost they all face across their portfolios.
Over half (53%) of those questioned said energy costs increased by over 51% across their commercial real estate portfolios. Alarmingly, just under a fifth (18%) reported increases of between 71% and 90%.
While this creates very real challenges for the sector, there is an opportunity to capitalise on the steps already made to improve energy efficiency that have been born out of the climate emergency.
Looming greenhouse gas reduction targets – to reduce Scope 1 emissions by 78% by 2035 and be net zero by 2050 – have seen commercial real estate managers take steps to improve environmental credentials across their portfolios, and they are already reaping the benefits.
Respondents to the Deepki survey highlighted a considerable increase in green premia – defined as the higher pricing power of more sustainable buildings.
Over half (56%) of respondents are seeing an uplift of 11%-15% in asset values, and a further 28% said they were seeing a 5%-10% value enhancement, reflecting the growing demand from occupiers and the people that use them for more efficient buildings.
Conversely, where buildings remain inefficient, managers can expect to take a hit on performance.
More than eight out of ten (82%) real estate managers expect the energy crisis to cause a dramatic increase in unoccupied buildings.
At the same time, 81% of managers expect to have to sell assets with poor energy more quickly than originally planned, which rarely produces optimal results.
With no end to the Russia Ukraine conflict in sight and as the cost-of-living crisis worsens, efforts to enhance their green credibility must continue if managers are to avoid further negative impacts on their portfolios and help play their part in keeping control of energy supplies this winter.
No comments yet